1999 ANNUAL REPORT IT’S OUR PEOPLE CUSTOMERS REMEMBER THE MOST Brought to you by Global Reports CONTENTS Chairman’s Report . 3 Chief Executive’s Report . 4 Unbroken Record of Profit Improvement . 6 Growing the Network . 8 Fleet for the Future . 10 More Options through Alliances . 12 Australia’s Best Food, Wine and Service . 14 Technology into the Next Millennium . 16 Part of the Community . 18 Board of Directors . 22 Senior Management . 25 Corporate Governance . 26 Performance Summary . 28 Concise Report . 29 Five Year Summary . 46 Shareholder Information . 48 Directory . IBC REGISTERED OFFICE FINANCIAL CALENDAR Qantas Airways Limited 1999 ACN 009 661 901 30 June Year end Qantas Centre 19 August Preliminary final result announcement Level 9 Building A 3 November Record date for final dividend 203 Coward Street 17 November Annual General Meeting, Adelaide Mascot NSW 2020 1 December Final dividend payable Australia 31 December Half year end Telephone 61 2 9691 3636 2000 Facsimile 61 2 9691 3339 17 February Half year result announcement 1 March Record date for interim dividend Internet Address 29 March Interim dividend payable http://www.qantas.com.au 30 June Year end 17 August Preliminary final result announcement 1 November Record date for final dividend 16 November Annual General Meeting, Sydney 29 November Final dividend payable NOTICE OF MEETING The 1999 Annual General Meeting of Qantas Airways Limited will be held at 2:00pm on Wednesday 17 November 1999 in the Regency Ballroom at the Hyatt Regency Adelaide, North Terrace, Adelaide. COVER: Michelle Maude, Licensed Aircraft Maintenance All amounts are expressed in Australian dollars Engineer, Line Maintenance, Sydney. unless otherwise stated. Brought to you by Global Reports FEATURES PAGE 6 UNBROKEN RECORD OF PROFIT IMPROVEMENT Qantas earned a net profit before tax of $662.5 million for the year ended 30 June 1999, an increase of 38.6 percent over 1997/98. Net profit after tax of $420.9 million increased by 38 percent. 8 GROWING THE NETWORK The development of markets with strong commercial potential in the USA and Europe, judicious entry into emerging markets and strengthened capacity at home have been the pillars of profitability in the last financial year. 10 FLEET FOR THE FUTURE Qantas continued its disciplined approach to aircraft acquisition in 1998/99 with the focus on the efficient use of existing aircraft, as well as commencing a program to upgrade the Rolls-Royce engines on its Boeing 747-400 fleet. 12 MORE OPTIONS THROUGH ALLIANCES Major alliance developments – including the implementation of oneworld and the expansion of other airline partnerships – have given Qantas customers more options than ever in terms of schedules and destinations and increased frequent flyer opportunities. 14 AUSTRALIA’S BEST FOOD, WINE AND SERVICE Qantas has extended its restaurant-style cuisine from First to Business Class and introduced a new range of premium Australian wines, while continuing its program of investment in domestic terminals. 16 TECHNOLOGY INTO THE NEXT MILLENNIUM Qantas is spending some $112 million to ensure its readiness for the Year 2000. The airline is also investing in sophisticated telecommunications and has introduced a range of electronic initiatives to improve customer access to bookings, travel information and tracking freight. QANTAS 1999 ANNUAL REPORT 1 Brought to you by Global Reports Qantas, the oldest airline in the English-speaking world, was founded in the Queensland outback in 1920. Qantas is recognised as one of the world’s leading long distance airlines, having pioneered services from Australia to North America and Europe. The Qantas Group carried more than 19 million passengers in 1998/99, operating a fleet of 135 aircraft across a network spanning more than 100 destinations in Australia, Africa, the Americas, Asia, the United Kingdom, Europe and the Pacific. Qantas employs almost 30,000 full and part-time staff of more than 100 nationalities, in more than 30 countries and speaking more than 50 different languages. 2 QANTAS 1999 ANNUAL REPORT Brought to you by Global Reports CHAIRMAN’S REPORT ANOTHER RECORD RESULT Qantas reported a net profit before tax of $662.5 million for the year ended 30 June 1999, an increase of 38.6 percent over the prior financial year. The half year result to 31 December the investment includes aircraft On behalf of the Qantas Board, I would 1998 was, in financial terms, the best refurbishments, lounge and terminal like to thank management and staff to date. The second half added to improvements and customer service for their commitment and congratulate that outcome and enabled Qantas to programs. This has enabled Qantas to them on their contribution to the continue its unbroken record of profit achieve its highest ever ratings in regular outstanding trading results for the improvement since listing on the internal surveys of customer service and 1998/99 financial year. Australian Stock Exchange in 1995. brand recognition. The full year result delivers significant The product investment program and value to shareholders through the record previously announced expansion of the earnings, the higher final ordinary fleet will generate increased depreciation dividend and, notably, the special and funding charges against profits in dividend. It was achieved in a market the 1999/2000 year and beyond. These GARY PEMBERTON, AC Chairman which continued to be strongly will need to be offset by higher revenues competitive and under a difficult or continuing efficiency gains. aviation policy environment. Going forward, management will not During the year, Qantas continued its change the strategies that have served extensive program of investment in Qantas well and will continue to manage product and service. Spanning three carefully the asset base and maintain years and totalling over $700 million, emphasis on productivity and efficiency. QANTAS 1999 ANNUAL REPORT 3 Brought to you by Global Reports CHIEF EXECUTIVE’S REPORT Qantas has been able to achieve sustained improvement in profitability over the last five years since its public float, in a challenging period which has included a collapse in the previously lucrative Japan market and subsequently the widespread, severe downturn in Asian markets. SUCCESSFUL COMMERCIAL STRATEGIES Kilometres (RPKs) increased by 1.5 continuity and contingency planning. Qantas commercial strategies have percent on stable capacity resulting in We invested also in a total Network been a major contributor to its financial an improvement in load factors of Redesign Program during the year which performance. These include investment 1.5 percentage points. will create one of the world’s most in new yield management systems, tight Domestic operations contributed advanced telephone, computer, Internet management of route profitability and $256.8 million in EBIT, an increase of and intranet networks, connecting all aircraft allocation, and substantial new 20.3 percent over the previous year operational sites around the world and expenditure to ensure high standards reflecting the robustness of the domestic providing for a major presence on the in products and services. Aggressive economy. Load factors and yields were World Wide Web. marketing and advertising have further maintained with capacity growth of AIRCRAFT AND SERVICES strengthened the Qantas brand and 3.8 percent. During the year, Qantas purchased reputation. Scheduling decisions have Subsidiary operations contributed two new Boeing 767-300s from the assisted in lifting operating efficiencies. $136.7 million to the Group’s EBIT, an manufacturer and two Boeing 747-400s Both current and future strategies increase of 41.8 percent on the prior from Malaysia Airlines. In addition, acknowledge the importance of revenue year. Subsidiary and other operations Qantas has firm orders for three Boeing as well as cost control. were a substantial part of the Group’s 747-400s and one Boeing 767-300 CONTRIBUTIONS TO PROFITS profit performance with all businesses scheduled for delivery in 1999 and 2000. International operations contributed including Catering, Qantas Holidays, This additional capacity will be deployed $308.3 million in Earnings Before Freight and Regional Airlines providing as part of announced schedule changes Interest and Tax (EBIT), up 13.4 percent. substantial returns. including additional services to London, Excluding the effects of movements in South Africa and Auckland, new services INFORMATION TECHNOLOGY foreign exchange rates, international to New York from Sydney and the first Qantas is on track with a comprehensive passenger revenues declined 1.4 percent non-stop services between Melbourne program to achieve readiness for the and yield was down by 2.8 percent over and Los Angeles. Year 2000 including detailed business the prior year. Revenue Passenger 4 QANTAS 1999 ANNUAL REPORT Brought to you by Global Reports “We are carefully building a greater sense of partnership and trust by being committed to an open, inclusive style of working together.” By the end of 1999, all major long Among the most satisfying aspects of the haul international routes will be huge changes which have occurred serviced by Boeing 747-400 aircraft in throughout Qantas in recent years are the new three-class configuration. the improved levels of understanding by Reconfiguration of the Boeing 767-300 our people of our business and the fleet is targeted for completion by the continuing competitive pressures we face. middle of next year. There is also a wide acknowledgement of Qantas extended its new restaurant style the critical role of profits and satisfactory inflight cuisine from First Class into returns to shareholders for the future of Business Class cabins in its international the business. aircraft during the year. This has in turn led to a growing willingness of staff to take responsibility COSTS Further extensive efficiency and and ownership of dramatic improvement productivity programs and lower fuel programs. We are carefully building a prices helped to improve margins. greater sense of partnership and trust by These gains were offset to some degree being committed to an open, inclusive by higher information technology and style of working together.